Apple and Ireland Win €13bn State Aid Appeal
The General Court of the European Union has today annulled the Commission’s decision regarding two Irish tax rulings in favour of Apple. The Commission had considered that the two rulings constituted State Aid, granting Apple €13bn in unlawful tax advantages.
The annulment of the Commission’s decision was on the basis that the Commission had failed to meet the requisite standard of proof. In that regard the outcome is similar to the Court’s rejection of other state aid decisions.
While accepting the Commission’s argument that an OECD arm’s length test was an appropriate tool to assess profit allocation (notwithstanding the absence of such a test in the national law at the time) the Court has concluded that the Commission has failed to prove that profits should have been allocated to the Irish branches. The Commission also failed to show that the tax rulings in dispute were methodologically unsound or the application of discretion.
The Commission will have the ability to appeal this decision to the Court of Justice however, the nature of these findings may make appeal on some of the issues difficult.
The decision is very helpful to those taxpayers in the UK who are affected by the Commission’s decision to regard the partial and full exemption of non-trading financing profits as state aid. The nature of this ruling, consistent with other similar outcomes annulling state aid decisions in the Belgian Excess Profits and Starbucks cases, challenges the Commission’s approach to the UK provisions which assumes that those provisions produce an advantage generally to all taxpayers benefiting from them. Rather, the Court has now consistently required the Commission to prove an advantage in specific cases. The “one-size-fits-all” approach to state aid appears, at the level of the General Court at least, to be precarious.
For those interested in the UK financing profits state aid case, a virtual seminar is being arranged to discuss recent developments and issues which have arisen from HMRC’s collection activities. Please contact Michael Anderson if you would like to attend.
The End is Nigh for the Non-Dom Regime
Published in ThoughtLeaders4 Private Client Magazine, Helen McGhee expert analysis of the current state of non-dom tax regime and it's future.
HMRC Makes Changes to COP9
On 14 June 2023, HMRC published a substantially rewritten Code of Practice 9 (“COP9”). Helen McGhee and Megan Durnford set out the key changes implemented as a result of this publication.
Pandora Papers: HMRC issues nudge letters
The Pandora Papers leak of almost 12m documents back in 2021 purportedly exposed the secret accounts and dealings (including potential tax evasion/ avoidance and money laundering) of 35 world leaders (including the late HM Elizabeth II), as well as many politicians and billionaires. The data was obtained by the International Consortium of Investigative Journalists in Washington DC and led to one of the biggest ever global financial investigations.
Increased Investment in Personal Tax Compliance in the UK (Published in Thought Leaders 4 Private Client)
Advances in technology and increased international fiscal co-operation have made global personal tax compliance initiatives pop up in abundance in recent years. To compound the issue, the Russian invasion of Ukraine and the corresponding economic fallout prompted domestic governments to increase transparency in relation to investments held by wealthy foreign individuals (with a focus on oligarchs).
In the UK, in the context of the cost-of-living crisis, public opinion certainly seems to be in favour of increased accountability for high-net-worth individuals (eg, on 9 October 2022, 63% of Britons surveyed thought that “the rich are not paying enough and their taxes should be increased”).1
HMRC is one of the most sophisticated tax collection authorities in the world and the department is making significant investments in technology in the field of compliance work; they are well placed to take advantage of new international efforts to increase tax compliance, particularly considering the already extensive network of 130 bilateral tax treaties in the UK (the largest in the world).2 The UK was also a founding member of the OECD’s Joint International Taskforce on Shared Intelligence and Collaboration (JITSIC) forum.
This article discusses the main developments in support of the increased focus on international transparency and personal tax compliance in the UK. There are other international fiscal initiatives, particularly in the field of corporate taxation, but such initiatives are beyond the scope of this article.
It should be noted that a somewhat piecemeal approach, with constant tinkering makes compliance difficult for the taxpayer and is often criticised for lacking the certainty that a stable tax system needs to thrive.
This article was first published with ThoughtLeaders4 Private Client Magazine
Tax-Related Measures in the Autumn Statement 2022
On 17 November 2022, the Rt Hon Jeremy Hunt MP, the Chancellor of the Exchequer, unveiled the contents of the Autumn Budget 2022. This comes after the International Monetary Fund (IMF) published its world economic forecast on 11 October 2022. The IMF expects the British economy to grow 3.6% in 2022 and 0.3% in 2023. Other major developed economies are also expected to stagnate next year, namely Spain (1.2%), the US (1.0%), France (0.7%), Italy (-0.2%) and Germany (-0.3%).
This note focuses on tax measures included as part of that statement.